Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/264829 
Year of Publication: 
2022
Series/Report no.: 
Working Paper No. 237
Publisher: 
Oesterreichische Nationalbank (OeNB), Vienna
Abstract: 
Granting a third-party guarantee for a loan does not directly involve a financial transaction. Therefore, guarantors might not understand that they are taking on a liability, albeit contingent. We introduce literacy about guarantees as a novel and distinct aspect of financial literacy. For ten Eastern European countries, we find that 45 percent of individuals lack this form of financial literacy. Instrumenting individual guarantee literacy with regional cohort-specific financial literacy, we show that guarantee literacy significantly reduces the probability of acting as a guarantor. Our results are robust to a placebo analysis and several sensitivity checks.
Subjects: 
Third-party loan guarantees
guarantee literacy
financial literacy
IV
JEL: 
D14
G51
G53
Document Type: 
Working Paper

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